Yahoo to acquire Tumblr in a $1.1 billion all-cash deal

Yahoo is about to expand its presence in the user-generated content market by acquiring Tumblr in a cash-only deal worth $1.1 billion.

According to the AllThingsD report, the Yahoo’s board has approved the deal, which will likely be announced on Monday morning.

Sources close to the matter said that Yahoo’s CEO Marissa Mayer has decided that buying Tumblr was going to be “the stake in the ground of what her strategy is going forward for Yahoo.” That strategy involves attracting younger audiences to Yahoo’s properties.

This is Yahoo’s biggest acquisition in the last couple of years; up until this point, Mayer has initiated a number of smaller deals, mostly in the mobile space.

We don’t have the complete picture of Yahoo’s strategy, but it looks like Mayer is preparing the company for a big mobile push. And we think she’s onto something…

Tumblr has a reported valuation of $800 million, and its (soon to be delighted) investors include Spark Capital, Union Square Ventures, Sequoia Capital, Greylock Partners, Insight Venture Partners and the Chernin Group.